SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
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STATE STREET RESEARCH PORTFOLIOS, INC.
(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11. (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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STATE STREET RESEARCH INTERNATIONAL EQUITY FUND
a series of
State Street Research Portfolios, Inc.
One Financial Center
Boston, Massachusetts 02111
Dear Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders of
State Street Research International Equity Fund, a series of State Street
Research Portfolios, Inc. (the "Fund"), to be held at the offices of the State
Street Research Portfolios, Inc. (the "Company"), at One Financial Center,
Boston, Massachusetts 02111 on May 14, 1999 at 4:00 p.m. local time.
At this important meeting, you will be asked to consider and act upon the
following proposals:
1. To approve an Agreement and Plan of Reorganization and Liquidation between
the Fund and State Street Research International Equity Fund, a newly-created
series of State Street Research Financial Trust.
2. To change the classification of the policy regarding investments in options
from fundamental to nonfundamental.
3. To amend the Fund's fundamental policy regarding investing in commodities
and commodity contracts.
4. To amend the Fund's fundamental policy relating to securities lending.
5. To amend the Fund's fundamental policy regarding industry concentration.
6. (For Class S shareholders only). To include Class S shares under the Fund's
Plan of Distribution Pursuant to Rule 12b-1.
I thank you for your participation as a shareholder and urge you to
exercise your right to vote by completing, dating and signing the enclosed proxy
card. A self-addressed, postage-paid envelope has been enclosed for your
convenience. Or, if you are eligible to do so, you may vote by telephone using
the procedures described in the proxy statement. We look forward to receiving
your vote.
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IT IS VERY IMPORTANT THAT YOUR VOTING INSTRUCTIONS BE RECEIVED NO LATER
THAN May 11, 1999. Instructions for shares held of record in the name of a
nominee, such as a broker-dealer, may be subject to earlier cut-off dates
established by such intermediaries to facilitate a timely response.
Sincerely,
/s/ Ralph F. Verni
Ralph F. Verni
Chairman of the Board,
President and Chief Executive Officer
<PAGE>
STATE STREET RESEARCH INTERNATIONAL EQUITY FUND
a series of
State Street Research Portfolios, Inc.
One Financial Center
Boston, Massachusetts 02111
--------------------------------
NOTICE OF SPECIAL MEETING
OF SHAREHOLDERS
To Be Held On May 14, 1999
--------------------------------
A Special Meeting of Shareholders of State Street Research International
Equity Fund, a series of State Street Research Portfolios, Inc. (the "Fund"),
will be held at the offices of State Street Research Portfolios, Inc., a
Maryland corporation (the "Company"), One Financial Center, Boston,
Massachusetts 02111 on May 14, 1999 at 4:00 p.m. local time (the "Meeting") for
the following purposes:
1. To consider and act upon an Agreement and Plan of Reorganization and
Liquidation providing for the transfer of the assets of the Fund (subject to
certain of its liabilities) to State Street Research International Equity Fund,
a series of State Street Research Financial Trust (the "Acquiring Fund") in
exchange for Class A, Class B(1), Class B, Class C and Class S shares of the
Acquiring Fund, the distribution of such shares to shareholders of the Fund and
the subsequent liquidation of the Fund.
2. To change the classification of the policy regarding investments in
options from fundamental to nonfundamental.
3. To amend the Fund's fundamental policy regarding investing in
commodities and commodity contracts.
4. To amend the Fund's fundamental policy relating to securities lending.
5. To amend the Fund's fundamental policy regarding industry concentration.
6. (For Class S shareholders only). To include Class S shares under the
Fund's Plan of Distribution Pursuant to Rule 12b-1.
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7. To consider and act upon any matter incidental to the foregoing and to
transact such other business as may properly come before the Meeting and any
adjournments thereof.
The close of business on February 18, 1999 has been fixed as the record
date for the determination of shareholders entitled to notice of, and to vote
at, the Meeting and any adjournments thereof.
YOUR VOTE IS IMPORTANT REGARDLESS OF THE SIZE OF YOUR HOLDINGS IN THE FUND.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE COMPLETE AND SIGN
THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. CERTAIN
SHAREHOLDERS MAY ALSO VOTE BY TELEPHONE; PLEASE SEE PAGES 3 AND 4 FOR DETAILS.
IF YOU DESIRE TO VOTE IN PERSON AT THE MEETING, YOU MAY REVOKE YOUR PROXY.
By Order of the Directors
FRANCIS J. McNAMARA, III
Secretary
February 22, 1999
Date of Notice
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QUESTIONS AND ANSWERS
Q: Why is this material being sent to shareholders and what are they supposed
to do with it?
A: This material is being sent to shareholders of the International Equity Fund
to ask them to vote on important recommendations by the Directors of the Fund
that will affect their interest in the Fund. You should read the material and
then vote. Certain shareholders may vote by telephone; please see pages 3 and
4 for details. Or, you may vote by marking the enclosed proxy form and
returning it.
Q: What if I have questions?
A: Call the State Street Research Service Center at 1-800-562-0032 for help with
your questions.
Q: What is the recommendation in Proposal 1?
A: Proposal 1 is asking shareholders of the International Equity Fund to simply
change its present form of organization from the sole portfolio series of
State Street Research Portfolios, Inc. to that of a newly-organized
portfolio series of State Street Research Financial Trust. The
reorganization will not change the investment objective or policies of the
Fund. This transaction is being proposed because it is expected that the
operation of the Fund as one of several portfolio series of State Street
Research Financial Trust will result in greater administrative efficiency.
After the change, the name of your fund will be the same as before.
Q: Under Proposal 2, what is a fundamental policy and why is the Fund changing
the policy on options to nonfundamental?
A: Fundamental policies are ones which can only be changed by shareholder vote.
The proposal is to change the policy to nonfundamental so that the Fund can
react quickly to investment ideas or regulatory changes in the future and
avoid coming back to the shareholders in the event of a conflict with an
old fundamental policy. The Fund expects to adopt a nonfundamental policy
which provides greater flexibility to invest in options as market
developments occur.
Q: Under Proposal 3, what is the change on commodities?
A: Commodities are a special category of investments, which includes so-called
futures contracts, which sophisticated investors like the Fund use to
protect against, or make money on, expected market changes. A revised
fundamental policy would be adopted to provide the Fund with greater
flexibility to invest in commodities.
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Q: Under Proposal 4 what is the change on lending?
A: Under the Fund's current lending policy, the Fund is permitted to lend its
portfolio securities only up to 20% of its total assets. The proposed
change would remove this percentage limitation. As a result, the Fund would
be permitted to lend its portfolio securities up to 33 1/3% of total assets
(total assets to include the value of the collateral received from the
lending of such securities).
Q: Under Proposal 5, what is the change on industry concentration?
A: Under current policy, the Fund may not make an investment which would cause
it to have more than 25% of its assets invested in companies in any one
industry. The proposed change would recognize that the way an industry is
defined can vary over time and acknowledges that the Fund may want to
redefine industries as businesses evolve.
Q: What is Proposal 6, for Class S shareholders only, relating to the Fund's
Plan of Distribution Pursuant to Rule 12b-1?
A: Class S shareholders of the Fund are being asked to include Class S shares
under the Distribution Plan. Class S shareholders would not incur any new
distribution fees, but the Distribution Plan will provide that the Fund's
distributor may expend its own resources in the distribution of Class S
Shares.
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Important additional information about the proposals is set forth in the
accompanying Proxy Statement. Please read it carefully.
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<PAGE>
STATE STREET RESEARCH INTERNATIONAL EQUITY FUND
a series of
State Street Research Portfolios, Inc.
One Financial Center
Boston, Massachusetts 02111
The following table identifies each proposal set forth in the Notice of
Special Meeting of Shareholders (the "Notice") and the checkmark (|ZC)
indicates which classes of the Fund's shareholders are being solicited to
approve which proposal.
<TABLE>
<S> <C> <C>
Proposal Fund Classes
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A, B(1), B & C S
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1. Agreement and Plan of Reorganization and |ZC |ZC
Liquidation
2. Options |ZC |ZC
3. Commodities |ZC |ZC
4. Securities Lending |ZC |ZC
5. Industry Concentration |ZC |ZC
6. Rule 12b-1 Plan (Class S Only) |ZC
</TABLE>
This Proxy Statement is furnished to the shareholders of State Street
Research International Equity Fund, the sole portfolio series of State Street
Research Portfolios, Inc., (the "Fund"), in connection with the solicitation of
proxies by and on behalf of the Board of Directors of State Street Research
Portfolios, Inc. (the "Company") to be used at a Special Meeting of
Shareholders of the Fund to be held at the offices of the Company, One
Financial Center, Boston, Massachusetts 02111 at 4:00 p.m. local time on May
14, 1999 and at any adjournment thereof (the "Meeting").
Any shareholder who has given a proxy has the right to revoke it at any
time prior to its exercise by attending the Meeting and voting his or her
shares in person or by submitting a written notice of revocation or a
later-dated proxy to the Company at the address of the Company set forth on the
cover page of this Proxy Statement prior to the date of the Meeting.
Shareholders of record of the Fund at the close of business on February 18,
1999 (the "Record Date") will be entitled to notice of, and to vote at, the
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Meeting of the Fund or to vote at any adjournments thereof. This Proxy
Statement, proxy and accompanying Notice of Special Meeting of Shareholders
(the "Notice") were first sent or given to shareholders of the Fund on or about
March 12, 1999.
As of the Record Date, there were approximately 1,699,317, 63,298,
1,919,032, 154,269 and 1,169,739 issued and outstanding Class A, Class B(1),
Class B, Class C and Class S shares, respectively, of the Fund. Each share of
the Fund is entitled to one vote, with a proportionate vote for each fractional
share.
If the enclosed Proxy form is properly executed and returned, or telephone
votes are received, in time, the shares represented thereby will be voted at the
Meeting in accordance with the shareholder's instructions. The proxy grants
discretion to the persons named therein, as proxies, to take such further action
as they may determine appropriate in connection with any other matter which may
properly come before the Meeting or any adjournments thereof. The Company does
not currently know of any matter to be considered at the Meeting other than the
proposals set forth in the Notice.
The affirmative vote of the holders of a majority of the shares entitled
to vote of the Fund outstanding at the close of business on the Record Date,
all classes voting together, is required to approve Proposal 1. Approval of
each of proposals 2 through 5 requires the affirmative vote of a majority of
the outstanding voting securities of the Fund as defined in the Investment
Company Act of 1940, as amended (the "1940 Act"). Under the 1940 Act, the vote
of a majority of the outstanding voting securities (a "1940 Act Majority Vote")
means the vote of the lesser of (i) 67% or more of the voting shares present at
the Meeting if the holders of more than 50% of the outstanding voting shares
are present or represented by proxy or (ii) more than 50% of outstanding voting
shares. Approval of Proposal 6 requires a 1940 Act Majority Vote of the Class S
shares of the Fund.
The holders of a majority of the shares entitled to vote of the Fund
outstanding at the close of business on the Record Date present in person or
represented by proxy constitute a quorum for the Meeting. In the event a quorum
is not present at the Meeting or in the event a quorum is present at the
Meeting but sufficient votes to approve the proposals are not received, the
persons named as proxies may propose an adjournment to a date not more than 120
days after the Record Date without further notice to shareholders of the
Meeting to permit further solicitation of proxies provided such persons
determine, after consideration of all relevant factors, including the nature of
the proposal, the percentage of votes then cast, the percentage of negative
votes then cast, the nature of the proposed solicitation activities and the
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nature of the reasons for such further solicitation, that an adjournment and
additional solicitation is reasonable and in the interests of shareholders. A
shareholder vote may be taken on one or more of the proposals prior to such
adjournment if sufficient votes have been received and such vote is otherwise
appropriate. Any such adjournment will require the affirmative vote of a
majority of those shares present at the Meeting in person or by proxy.
For purposes of determining the presence of a quorum for transacting
business at the Meeting and for determining whether sufficient votes have been
received for approval of any proposal to be acted upon at the Meeting,
abstentions and broker "non-votes" (that is, proxies from brokers or nominees
indicating that such persons have not received instructions from the beneficial
owner or other persons entitled to vote shares on a particular matter with
respect to which the brokers or nominees do not have, or choose not to
exercise, discretionary power) may at the discretion of the Company be treated
as shares that are present at the Meeting and entitled to vote on the proposal,
but which have not been voted. For this reason, abstentions and broker
non-votes could assist the Fund in obtaining a quorum. When counted as present,
abstentions and broker non-votes have the practical effect of a "no" vote for
purposes of obtaining the requisite vote for approval of proposals 1 through 6.
When abstentions and broker non-votes are not counted as present, the
percentage voting in favor of a proposal will be arithmetically higher than if
such abstentions and broker non-votes were counted.
A shareholder may vote:
o By telephone
- Through fully automated touch-tone voting
- Verbally, with a telephone representative
o By mail
o In person at the Meeting
There are two convenient methods to vote by using the telephone. (Please
note, however, that these two telephone methods of voting are not available to
shareholders whose shares are held by a broker or other intermediary on the
shareholder's behalf.) If telephone voting is available for a shareholder's
account, toll-free telephone numbers will be printed on the Proxy form. Prior to
calling, the shareholder should read the Proxy Statement and have his or her
Proxy form at hand.
First, a shareholder may use the automated touch-tone voting method by
calling the toll-free number provided on the Proxy form. At the prompt, the
shareholder enters the control number provided on the Proxy form, then follows
the menu.
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Second, a separate toll-free number is provided on the Proxy form for
shareholders who wish to speak to a telephone representative directly and give
verbal instructions. The telephone representative will assist the shareholder
with the voting process. Although a telephone representative will assist with
any questions, the answers to which are contained in the Proxy Statement, the
representative will not make recommendations on how to vote on any proposal.
A written confirmation of the shareholder's telephone instructions will be
mailed within 72 hours. The shareholder immediately should call 1-877-392-4944
toll-free between 9 A.M. and 6 P.M. Monday through Friday Boston time if no
confirmation is received or if the shareholder's instructions have not been
properly reflected.
Shareholders voting their Proxies by either telephone method should not
return their Proxy forms by mail.
By using the telephone to submit voting instructions, the shareholder is
authorizing First Data Investor Services Group, Inc. ("FDISG"), a proxy
solicitation firm, and its agents, to execute a proxy to vote the shareholder's
shares at the Meeting as the shareholder has indicated. Questions about the
proposal itself should be directed to the State Street Research Service Center
at 1-800-562-0032.
If a shareholder wishes to participate in the Meeting, but does not wish to
authorize the execution of a Proxy by telephone, the shareholder may still mail
the Proxy form included with this Proxy Statement or attend the Meeting in
person.
Any shareholder who has given a Proxy, by telephone or in written form, has
the right to revoke it at any time prior to its exercise by submitting a
subsequent telephone vote, or a written notice of revocation or a later-dated
Proxy, or by attending the Meeting and voting his or her shares in person.
The Company believes that the procedures for authorizing the execution of a
Proxy by telephone set forth above are reasonably designed to ensure that the
identity of the shareholder casting the vote is accurately determined and that
the voting instructions of the shareholder are accurately recorded. Telephone
calls will be recorded.
Employees of State Street Research & Management Company (the "Investment
Manager"), affiliates of the Investment Manager, or other representatives of the
Company, such as FDISG, may also solicit Proxies by contacting shareholders by
telephone or in person.
The Company intends to use FDISG, and its agents, to assist with the
mailing and tabulation effort and any special, personal solicitation of Proxies.
The costs
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of retaining FDISG and its agents to perform such services, which are not
expected to exceed $25,000, will be borne by the Fund, in addition to
out-of-pocket expenditures for postage, printing and related items. The Fund
will reimburse brokerage firms and others for their expenses in forwarding
solicitation material to the beneficial owners of shares of the Fund.
Upon request by a shareholder of the Fund to State Street Research Service
Center, One Financial Center, Boston, Massachusetts 02111 at 1-800-562-0032,
the annual report and most recent semiannual report succeeding the annual
report, if any, for the Fund will be furnished without charge to the requesting
shareholder.
The Fund's distributor is State Street Research Investment Services, Inc.,
("SSRIS") One Financial Center, Boston, Massachusetts 02111.
As of December 31, 1998, no person or entity was the beneficial owner of 5%
or more of the Fund's shares. As of the same date, no Director or principal
officer owned individually more than 1% of the Fund's shares, nor did the
Directors and officers as a group own more than 1% of the Fund's shares.
5
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PROPOSAL ONE
AGREEMENT AND PLAN OF REORGANIZATION AND LIQUIDATION
Proposed Reorganization
The Board of Directors of the Company and the Board of Trustees of State
Street Research Financial Trust (the "Trust"), respectively, have approved an
Agreement and Plan of Reorganization and Liquidation (the "Plan of
Reorganization") substantially in the form set forth as Exhibit A to this Proxy
Statement. The Plan of Reorganization provides for the transfer of all of the
assets of the Fund to State Street Research International Equity Fund, a
newly-organized series of the Trust (the "Acquiring Fund"), and the assumption
by the Acquiring Fund of all liabilities of the Fund reflected on an unaudited
statement of assets and liabilities in exchange for Class A, Class B(1), Class
B, Class C and Class S shares of beneficial interest, $.001 par value per
share, of the Acquiring Fund (the "Acquiring Fund Shares"). The number and
aggregate net asset value of the Acquiring Fund Shares of each class to be
issued will equal the number and aggregate net asset value of each
corresponding class of the Fund outstanding as of the close of business on the
business day immediately prior to the closing of the Reorganization (the
"Valuation Date"). The obligations of the Company and the Trust to effectuate
the Reorganization are subject to the satisfaction of certain conditions,
including approval by the shareholders of the Fund of the Plan of
Reorganization. The closing ("Closing") of the Reorganization will take place
following the satisfaction or waiver of the conditions to the Reorganization.
At or as soon as practicable after the Closing, the Fund will liquidate and
distribute to its shareholders of record as of the close of business on the
Valuation Date the full and fractional Acquiring Fund Shares received by the
Fund, each shareholder to receive a number of Acquiring Fund Shares of each
class equal to the number of shares of common stock of the Fund of the
corresponding class held by such shareholder on the Valuation Date. The
proposed transaction described above is referred to in this Proxy Statement as
the "Reorganization". The Fund and the Acquiring Fund may hereinafter be
referred to collectively as the "Funds" and individually as a "Fund." The Board
of Directors of the Company may hereinafter be referred to as the "Board of
Directors," and the Board of Trustees of the Trust may hereinafter be referred
to as the "Board of Trustees."
The Acquiring Fund will commence operations upon the Reorganization and
will have an investment objective, policies and restrictions that are identical
to those of the Fund (which will reflect any modifications of the Fund's
policies that are approved by shareholders pursuant to Proposals 2 through 5 in
this Proxy Statement).
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In the Reorganization, the Acquiring Fund will assume certain liabilities,
including all expenses, costs, charges and reserves reflected on an unaudited
statement of assets and liabilities of the Fund prepared as of the close of
business on the Valuation Date in accordance with generally accepted accounting
principles consistently applied from the prior audited period. Such statement
of assets and liabilities will reflect those liabilities known to the Fund as
of the date thereof.
The Plan of Reorganization authorizes the Fund, as the sole shareholder of
the Acquiring Fund prior to the distribution of the Acquiring Fund Shares to
Fund shareholders to approve an Investment Management Agreement (the "New
Management Agreement") between the Trust, on behalf of the Acquiring Fund, and
SSRM.
The liquidation of the Fund and distribution of the Acquiring Fund Shares
to shareholders of the Fund will be accomplished by the establishment of
shareholder accounts on the share records of the Acquiring Fund in the name of
each such shareholder of the Fund, representing the respective number of full
and fractional Acquiring Fund Shares due such shareholder. All of the Acquiring
Fund's future distributions attributable to the shares issued in the
Reorganization will be paid to shareholders in cash or invested in additional
shares of the Acquiring Fund at the price in effect as described in the
Acquiring Fund's prospectus on the respective payment dates in accordance with
instructions previously given by the shareholder to the Fund's transfer agent.
As of the Closing, each outstanding certificate which, prior to the Closing,
represented shares of the Fund will be deemed for all purposes to evidence
ownership of the number of Acquiring Fund Shares issuable with respect thereto
pursuant to the Reorganization. After the Closing, certificates originally
representing shares of Class A or Class S of the Fund will be rendered
nonnegotiable; upon special request and surrender of such certificates to State
Street Bank and Trust Company ("State Street Bank") as transfer agent, holders
of these nonnegotiable certificates shall be entitled to receive certificates
representing the number of Acquiring Fund Shares issuable with respect thereto.
All Class B(1), Class B and Class C shares of the Acquiring Fund are held of
record in book entry form and no certificates for such shares will be issued.
Following the Closing, the Company will be deregistered as an investment
company under the 1940 Act and will be dissolved under Maryland law.
Notwithstanding approval by shareholders of the Fund, the Plan of
Reorganization may be terminated at any time prior to the consummation of the
Reorganization without liability on the part of either party or its respective
Directors or Trustees, officers or shareholders, by the Board of Directors or
by the Board of Trustees if circumstances should develop that, in the opinion
of the Board of Directors or the Board of Trustees, make proceeding with the
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Reorganization inadvisable. The Plan of Reorganization may be amended, waived
or supplemented in such manner as may be mutually agreed upon by the authorized
officers of the Company and the Trust; provided, however, that following the
Meeting, no such amendment, waiver or supplement may have the effect of
changing the provision for determining the number of Acquiring Fund Shares to
be issued to the Fund shareholders to the detriment of such shareholders
without their further approval. The expenses incurred in connection with
entering into and carrying out the provisions of the Plan of Reorganization,
whether or not the Reorganization is consummated, will be paid by the Fund.
Full and fractional shares of the Acquiring Fund will be issued to the
Fund shareholders in accordance with the procedures under the Plan of
Reorganization as described above. Each share will be fully paid and
nonassessable by the Trust when issued and transferable without restrictions
and will have no preemptive or cumulative voting rights and have only such
conversion or exchange rights as the Board of Trustees of the Trust may grant
in its discretion.
By approving the Reorganization, shareholders will be agreeing to waive
any investment restrictions which could be deemed to prohibit the
Reorganization to the extent necessary to effect the Reorganization.
Reasons for the Reorganization
The Board of Directors has proposed the Reorganization to simplify the
administration of the Fund. Specifically, following the Reorganization the Fund
will be one among the multiple series of the Trust as opposed to the sole
series of the Company. The Company will also deregister as an investment
company with the Securities and Exchange Commission (the "Commission"). The
Reorganization will consequently eliminate the need for a separate registration
statement filing by the Company with the Commission as well as certain state
filings. In addition, the Fund will become a series of a Massachusetts business
trust, the form of organization used by all other registered investment
companies currently managed by SSRM and distributed by SSRIS. The use of a
common form of organization will facilitate administration of the Fund by
eliminating the need to monitor and comply with a separate set of legal
requirements applicable to a Maryland corporation.
Federal Income Tax Consequences
Tax counsel to the Fund, Goodwin, Procter & Hoar LLP, is to opine that,
subject to customary assumptions and representations, on the basis of the
existing provisions of the Internal Revenue Code (the "Code"), the Treasury
Regulations promulgated thereunder and current administrative and judicial
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interpretations thereof, for Federal income tax purposes: (a) the transfer of
all or substantially all of the Fund's assets solely in exchange for Acquiring
Fund Shares and the assumption by the Acquiring Fund of certain assumed
liabilities of the Fund, and the distribution of such shares to shareholders of
the Fund will constitute a "reorganization" within the meaning of Section
368(a)(1)(F) of the Code; the Fund and the Acquiring Fund will each be a "party
to a reorganization" within the meaning of Section 368(b); (b) no gain or loss
will be recognized by the Fund or the Acquiring Fund on the transfer of the
Fund's assets to the Acquiring Fund in exchange for Acquiring Fund Shares and
the assumption by the Acquiring Fund of certain assumed liabilities of the
Acquired Fund or upon the distribution of the Acquiring Fund Shares to the
Fund's shareholders in exchange for their shares of the Fund; (c) the tax basis
of the Fund's assets acquired by the Acquiring Fund will be the same to the
Acquiring Fund as the tax basis of such assets to the Fund immediately prior to
the Reorganization, and the holding period of the assets of the Fund in the
hands of the Acquiring Fund will include the period during which those assets
were held by the Fund; (d) no gain or loss will be recognized by the Acquiring
Fund upon the receipt of the assets of the Fund solely in exchange for the
Acquiring Fund Shares and the assumption by the Acquiring Fund of certain
assumed liabilities of the Fund; (e) no gain or loss will be recognized by
shareholders of the Fund upon the receipt of the Acquiring Fund Shares by such
shareholders, provided such shareholders receive solely Acquiring Fund Shares
(including fractional shares) in exchange for their Fund shares; (f) the
aggregate tax basis of the Acquiring Fund Shares, including any fractional
shares, received by each shareholder of the Fund pursuant to the Reorganization
will be the same as the aggregate tax basis of the Fund's shares held by such
shareholder immediately prior to the Reorganization, and the holding period of
the Acquiring Fund Shares, including fractional shares, to be received by each
shareholder of the Fund will include the period during which the Fund's shares
exchanged therefor were held by such shareholder (provided that the Fund's
shares were held as a capital asset on the date of the Reorganization).
The receipt of such an opinion is a condition to the consummation of the
Reorganization. If the transfer of the assets of the Fund in exchange for
Acquiring Fund Shares and the assumption by the Acquiring Fund of certain
liabilities of the Fund do not constitute a tax-free reorganization, each Fund
shareholder will recognize gain or loss equal to the difference between the
value of Acquiring Fund Shares such shareholder acquires and the tax basis of
such shareholder's Fund shares.
Shareholders of the Fund should consult their tax advisers regarding the
effect, if any, of the proposed Reorganization in light of their individual
circumstances. Since the foregoing discussion relates only to the Federal
income tax consequences of the Reorganization, shareholders of the Fund should
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also consult their tax advisers as to state and local tax consequences, if any,
of the Reorganization.
Management and Other Service Providers
Responsibility for the management and supervision of the Company and the
Fund rests with the Company's Board of Directors. The same individuals that
currently serve as Directors of the Company also serve as Trustees of the Trust.
In addition, Susan M. Phillips serves as Trustee of the Trust. She is 54. Her
principal occupation is currently Dean and Professor of Finance and
Administration, School of Business and Public Management, The George Washington
University. Dr. Phillips's other principal business affiliations include
Director of Cantor Fitzgerald Futures Exchange, Inc. and State Farm Life
Insurance Company. Previously, she was a member of the Board of Governors of the
Federal Reserve System and Chairman and Commissioner of the Commodity Futures
Trading Commission. Bruce R. Bond has also been nominated to serve as Trustee of
the Trust. He is 51. His principal occupation is Chairman of the Board, Chief
Executive Officer and President of PictureTel Corporation. His other principal
business affiliations include Director of WITCO Corporation, a specialty
chemical company and Ceridian Corporation, a leading information services
company. During the past five years, he has also served as Chief Executive
Officer of ANS Communications (a communications networking company) and as
managing director of British Telecommunications PLC.
SSRM, the Fund's investment manager, is an indirect, wholly-owned
subsidiary of Metropolitan Life Insurance Company ("Metropolitan"). The Company
and SSRM are parties to an Investment Management Agreement (the "Current
Management Agreement") pursuant to which SSRM provides investment research and
management and other services for the Fund. In consideration for such services,
SSRM receives a monthly investment advisory fee from the Fund based on the
average daily value of the net assets of the Fund. The Current Management
Agreement between SSRM and the Company was transferred in March, 1997 to SSRM
from SSRIS which is also an indirect, wholly-owned subsidiary of Metropolitan.
Responsibility for the management and supervision of the Trust, including
the Acquiring Fund, rests with the Trust's Board of Trustees. SSRM will also
act as investment manager of the Acquiring Fund. The Trust will enter into the
New Management Agreement with SSRM that is substantially identical to the
Current Management Agreement.
State Street Bank will act as custodian and transfer agent for the
Acquiring Fund pursuant to agreements with the Trust that are substantially
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similar to the current agreements with the Company. State Street Bank is not an
affiliate of the Acquiring Fund, the Fund, Metropolitan, SSRIS or SSRM.
Deloitte & Touche LLP serves as the independent accountants for the Fund.
PriceWaterhouseCoopers LLP, the independent accountants for each of the other
series of the Trust, will serve as independent accountants for the Acquiring
Fund.
Multiple Class Structure; Distribution Arrangements
The Fund has outstanding and generally offers four classes of shares: Class
A, Class B(1), Class C and Class S. The Fund also offers Class B shares, but
only to current Class B shareholders through reinvestment of dividends and
distributions or through exchanges from existing Class B accounts of the State
Street Research Funds. Class A, Class B(1), Class C and Class S shares may be
purchased through securities dealers, other financial intermediaries, and
special programs at the next determined net asset value per share plus, in the
case of all classes except the Class S shares, a sales charge which, at the
election of the investor, may be imposed (a) at the time of purchase (the Class
A shares) or (b) on a deferred basis (the Class B(1) and Class C shares). In the
proposed Reorganization, shareholders of the Fund will receive the corresponding
class of shares of the Acquiring Fund which they currently hold in the Fund. The
Class A, Class B(1), Class C and Class S shares of the Acquiring Fund will have
identical arrangements with respect to the imposition of initial and contingent
deferred sales charges and distribution and service fees as the comparable class
of shares of the Fund. The Reorganization will be effected at net asset value
without the imposition of a sales charge, and thus, Acquiring Fund Shares
acquired by shareholders of the Fund pursuant to the proposed Reorganization
would not be subject to any initial sales charge or contingent deferred sales
charge as a result of the Reorganization. However, holders of the Acquiring Fund
Shares acquired as a result of the Reorganization would continue to be subject
to a contingent deferred sales charge upon subsequent redemption to the same
extent as if they had continued to hold their shares of the Fund. For purposes
of computing the contingent deferred sales charge that may be payable upon
disposition of any acquired Class A, Class B(1) and Class C shares of the
Acquiring Fund, the holding period of the redeemed shares will be "tacked" to
the holding period of the Fund.
SSRIS serves as distributor of shares of the Fund. The Fund adopted a Plan
of Distribution Pursuant to Rule 12b-1 (the "General Distribution Plan") in
1993 that is currently applicable to Class A, B and C shares of the Fund. (If
Proposal 6 is adopted, the General Distribution Plan would also be applicable to
Class S shares.) The Fund has also adopted a Rule 12b-1 Plan for Distribution
of Shares that is currently applicable to the Class B(1) shares of the Fund
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(the "Share Distribution Plan") (collectively, the "Distribution Plans"). Under
the Distribution Plans, and a distribution agreement between the Company and
SSRIS, the Fund makes payments to SSRIS based on an annual percentage of the
average daily value of the net assets of each class of shares.
The Acquiring Fund's Distribution Plans and related distribution agreement
will be substantially identical to the Fund's Distribution Plans and
distribution agreement, respectively.
Dividends and Distributions
The Acquiring Fund will have the same dividend and distribution policy as
the Fund. The Fund's policy is to declare dividends annually from net
investment income, if any. Distributions by the Fund of capital gain net
income, if any, will generally be made after the end of the fiscal year or as
otherwise required for compliance with applicable tax regulations. After the
closing of the Reorganization, Fund shareholders who currently have dividends
reinvested will continue to have dividends reinvested in the Acquiring Fund and
those shareholders who currently have capital gains reinvested will continue to
have capital gains reinvested in the Acquiring Fund. The number of shares
received in connection with any such reinvestment will be based upon the net
asset value per share of the applicable class of shares of the Acquiring Fund
in effect on the record date.
Shareholder Services
The Acquiring Fund will offer the same shareholder services, including the
Open Account System, reinvestment privileges, a systematic withdrawal plan, a
dividend allocation plan, telephone transactions and access to the Investamatic
Check Program, an automatic investment program.
The Acquiring Fund will have the same exchange privileges as the Fund.
Shareholders of the Fund may exchange their shares for shares of a
corresponding class of shares, when available, of certain funds as determined
by SSRIS, at any time on the basis of the relative net asset values of the
respective shares to be exchanged, subject to compliance with applicable
securities laws. Shareholders of any other such fund may similarly exchange
their shares for shares of an available corresponding class of the Acquiring
Fund.
The Acquiring Fund will offer the same redemption features as the Fund,
including the acceptance of redemption requests by mail, telephone and wire,
provided that applicable conditions are met. Any request to redeem shares of
the Fund received and processed prior to the Reorganization will be treated as
a redemption of shares of the Fund. Any request to redeem shares received or
processed after the Reorganization will be treated as a request to redeem
shares of the Acquiring Fund.
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Minimum Account Size
The Acquiring Fund will be subject to the same procedures with respect to
minimum account size as the Fund. The Fund reserves the right to redeem an
account if the aggregate value of the shares in such account is less than $1,500
for a period of 60 days after notice is mailed to the applicable shareholder, or
to impose a maintenance fee on such account after 60 days' notice. Currently,
the maintenance fee is $18 annually. The Acquiring Fund shareholder accounts
established pursuant to the Reorganization with a value of less than $1,500 will
therefore be subject to redemption upon 60 days' prior notice or the annual
maintenance fee. During such 60-day period, a shareholder will have the option
of avoiding such redemption or maintenance fee by increasing the value of the
account to $1,500 or more.
Fiscal Year
The Acquiring Fund will operate on a fiscal year ending October 31.
Comparative Information on Shareholder Rights.
The following is a summary of certain of the provisions of the Company's
Restated Articles of Incorporation and By-laws and the Trust's First Amended
and Restated Master Trust Agreement and By-laws. Shareholders should refer
directly to the provisions of the Company's Restated Articles of Incorporation
and By-laws and the Trust's Master Trust Agreement and By-laws for their full
text.
General. The Fund is a series of the Company, which was organized as a
Maryland corporation in April, 1991 under the name MetLife Portfolios, Inc. and
is registered with the Commission as an open-end management company. The
Company subsequently changed its name to State Street Research Portfolios, Inc.
and is currently governed by Restated Articles of Incorporation, dated
February, 1995, as amended. The above-referenced Restated Articles of
Incorporation may hereinafter be referred to as the "Restated Articles of
Incorporation." As a Maryland corporation, the Company's operations are
governed by its Restated Articles of Incorporation and applicable Federal and
Maryland law.
The Acquiring Fund is a series of the Trust, a business trust which was
established in 1986 under the laws of the Commonwealth of Massachusetts and is
registered with the Commission as an open-end management company. The Trust and
the Acquiring Fund are governed by a First Amended and Restated Master Trust
Agreement dated June 1, 1993, as further amended thereafter. The
above-referenced Master Trust Agreement may hereinafter be referred to as the
"Master Trust Agreement." As a Massachusetts business trust, the Trust's
operations are governed by its Master Trust Agreement and applicable Federal
and Massachusetts laws.
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Shares of the Fund and the Acquiring Fund. Interests in the Fund are
represented by shares of common stock, $.01 par value per share. The Company's
Restated Articles of Incorporation have authorized 2 billion shares of common
stock, 100 million shares of which are authorized to be issued as shares of the
Fund. As of the date hereof, the Fund is the sole operating series of the
Company. Each share of any Company series represents an equal proportionate
interest in the assets and liabilities, excluding differences in class
expenses, belonging to that series. As such, each share is entitled to
dividends and distributions out of the surplus or other lawfully available
assets belonging to that series as declared by the Board of Directors.
Beneficial interests of the Acquiring Fund will be represented by
transferable shares, par value $.001 per share. The Master Trust Agreement
permits the Trustees to issue an unlimited number of shares and to divide such
shares into an unlimited number of series. As of the date hereof, the Trust has
four operating series: State Street Research Government Income Fund; State
Street Research Strategic Portfolios: Conservative; State Street Research
Strategic Portfolios: Moderate; and State Street Research Strategic Portfolios:
Aggressive. Each share of any Trust series represents an equal proportionate
interest in the assets and liabilities, excluding differences in class
expenses, belonging to that series. As such, each share is entitled to
dividends and distributions out of the income (after expenses) belonging to
that series as declared by the Board of Trustees.
Voting Requirements. The Company's Restated Articles of Incorporation may
be amended at any time in the manner prescribed by Maryland law. On any matter
which affects only the interests of a certain series or class of shares of the
Fund and with respect to which a separate series or class vote is required by
the 1940 Act or Maryland law, only the holders of shares of that series or
class, as the case may be, are entitled to vote.
Generally, the provisions of the Master Trust Agreement of the Trust may be
amended at any time, so long as such amendment does not adversely affect the
rights of any shareholder with respect to which such amendment is or purports to
be applicable and so long as such amendment is not in contravention of
applicable law, by an instrument in writing signed by a majority of the then
Trustees (or by an officer of such Trust pursuant to the vote of a majority of
such Trustees). Generally, any amendment to the Trust's Master Trust Agreement
that adversely affects the rights of shareholders of one or more series may be
adopted by a majority of the then Trustees of the Trust when authorized by
shareholders holding a majority of the shares entitled to vote.
Voting Rights. Neither the Company nor the Fund holds an annual meeting of
shareholders, and there normally is no meeting of shareholders for the purpose
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of electing Directors unless and until such time as less than a majority of the
Directors holding office have been elected by shareholders. On each matter
submitted to a vote of the shareholders of the Company, each shareholder is
entitled to one vote for each whole share owned and a proportionate, fractional
vote for each fractional share outstanding in the shareholder's name on the
Company's books. On any matter which affects only the interests of a certain
series of shares of the Company, such as the Fund, or any class of such series
and with respect to which a separate series or class vote is required by the
1940 Act or Maryland law, only the holders of shares of that series or class,
as the case may be, are entitled to vote. Directors hold office until a
successor is elected and qualified, and vacancies in the Board of Directors may
be filled by the Board of Directors.
The Master Trust Agreement provides that special meetings of shareholders
for any purpose requiring action by shareholders under such Master Trust
Agreement or the Trust's By-laws shall be called upon the written request of
holders of at least 10% of the outstanding shares of the Trust or, as the
context may require, a series thereof. The Master Trust Agreement provides in
general that shareholders have the power to vote only on certain matters,
including, among others, (a) the election or removal of Trustees as provided in
the Master Trust Agreement; (b) with respect to certain contracts, such as
contracts for investment advisory or management services, to the extent
required as provided in the Master Trust Agreement as a whole; (c) with respect
to any termination of the Trust as provided in the Master Trust Agreement; (d)
an amendment of the Master Trust Agreement as provided in the Master Trust
Agreement; and (e) with respect to such additional matters relating to the
Trust as may be required by the 1940 Act, the Master Trust Agreement, the
By-laws or any registration of the Trust with the Commission or as the Trustees
may consider necessary or desirable. Certain of the foregoing matters will
involve separate votes of one or more series (or classes thereof) of the Trust,
while others will require a vote of the Trust's shareholders as a whole.
Under the Master Trust Agreement, the Trustees of the Trust may
reorganize, merge or liquidate the Acquiring Fund without shareholder approval.
On the other hand, a shareholder vote is generally required for such actions
under Maryland law. The Board of Trustees of the Trust believe that, in most
circumstances, it is not in the best interests of shareholders to require a
meeting of shareholders to reorganize, merge or liquidate the Acquiring Fund.
For example, the Acquiring Fund may have insufficient assets to invest
effectively or high expense levels because of operational needs. In such a
case, the Trustees may determine that it would be in the best interests of
shareholders to merge the Acquiring Fund with another mutual fund that has
similar investment objectives or policies, which could have the effect of
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reducing the per share expenses of each fund or otherwise benefit shareholders.
The process of obtaining shareholder approval for such a transaction, however,
may make it difficult to complete the transaction and, in general, will
substantially increase the costs of the transaction for shareholders.
The Trustees of the Trust believe that it would be in the best interests
of shareholders to permit consummation of such a transaction without incurring
the expenses associated with holding a meeting of shareholders. The Trustees of
the Trust would exercise the authority in a reasonable manner. Any action by
the Trustees of the Trust would be subject to compliance with any laws that may
be applicable. While the 1940 Act does not require shareholder approval for
these actions, the Acquiring Fund would comply with any other indirect
requirements of the 1940 Act that would become applicable. If circumstances
warranted, the Trustees of the Trust could determine to elicit viewpoints from
shareholders prior to any action or conduct a formal proxy solicitation even
though not required. In all cases, shareholders would receive notice prior to
completion of any transaction. The Trustees of the Trust do not have any
present plans to use this authority.
Shareholder Liability. Under Maryland law, the Fund's shareholders have no
personal liability for the Fund's corporate acts and obligations. The Maryland
General Corporation Law does not have any provision pertaining to shareholder
responsibility for unpaid corporate liabilities in the event of dissolution.
Under Massachusetts law, shareholders of a Massachusetts business trust
could, under certain circumstances, be held personally liable for the
obligations of the Trust. However, the Master Trust Agreement disclaims
shareholder liability for acts or obligations of the Trust. The Master Trust
Agreement provides for indemnification, under certain circumstances, out of the
assets of the applicable series for all losses and expenses of any shareholder
held personally liable by virtue of his status as such, and not because of such
shareholder's acts or omissions or for some other reason, for the obligations of
the Trust. Thus, the risk of a shareholder incurring financial loss on account
of shareholder liability is considered by the Trust to be remote since it is
limited to circumstances in which a disclaimer is inoperative and the Trust
itself would be unable to meet its obligations.
Shares of the Acquiring Fund issued to the shareholders of the Fund in the
Reorganization will be fully paid and nonassessable by the Trust when issued
and transferable without restrictions and will have no preemptive or conversion
rights.
Liability of Directors, Trustees and Officers. The By-Laws of the Company
provide that the Company will indemnify Directors and officers of the Company
against liabilities and expenses incurred in connection with litigation in
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which they may be involved because of their positions with the Company to the
extent permitted by Maryland law. The Company only is required under the Bylaws
to indemnify or advance expenses to any person other than a Director to the
extent specifically approved by resolution adopted by the Board of Directors.
Nothing in the Restated Articles of Incorporation or the By-laws of the
Company, however, protects or indemnifies a Director or officer against any
liability to which such person would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of such person's office. The method for determining
whether indemnification will be provided will be (a) a final decision on the
merits by a court or other body before whom the proceeding was brought that the
person to be indemnified was not liable by reason of disabling conduct, or (b)
in the absence of such a decision, a reasonable determination, based upon a
review of the facts, that the person to be indemnified was not liable by reason
of disabling conduct, by (i) the vote of a majority of a quorum of Directors
who are neither "interested persons" of the Company, as defined in the 1940
Act, nor parties to the proceeding, or (ii) an independent legal counsel in a
written opinion. The Company may not advance legal expenses for the defense of
a proceeding brought by the Company or its shareholders against a Director or
officer unless, among other things, he or she furnishes an undertaking to repay
the advance unless it is ultimately determined that he or she is entitled to
indemnification.
Under the Master Trust Agreement, Trustees and officers will be
indemnified, under certain circumstances, for all liabilities, including the
expenses of litigation, against them unless their conduct is determined to
constitute willful misfeasance, bad faith, gross negligence or reckless
disregard of their duties ("disabling conduct"). A determination that a Trustee
or officer is entitled to indemnification may be based upon the outcome of a
court action or administrative proceeding or a reasonable determination,
following a review of the facts, by (a) a vote of a majority of a quorum of the
Trustees who are neither "interested persons" of the Trust as defined in the
1940 Act nor parties to the proceeding or (b) an independent legal counsel in a
written opinion that such Trustee or officer was not liable by reason of
disabling conduct. The Trust may also advance money for these expenses provided
that the Trustee or officer undertakes to repay the Trust if his or her conduct
is later determined to preclude indemnification and certain other conditions
are met.
It should be noted that it is the view of the staff of the Commission that
to the extent that any provisions such as those described above are
inconsistent with the 1940 Act, including Section 17 thereof, the provisions of
the 1940 Act preempt such inconsistent provisions.
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Appraisal Rights.
Under Maryland General Corporation Law, shareholders of the Fund do not
have appraisal rights in connection with a combination or acquisition of the
assets of the Fund by another entity. Shareholders of the Fund may, however,
redeem their shares at net asset value prior to the date of the Reorganization.
Neither the Master Trust Agreement of the Trust nor Massachusetts law
grants the shareholders of the Acquiring Fund any rights in the nature of
dissenters' rights of appraisal with respect to any action upon which such
shareholders may be entitled to vote.
The Directors of the Company, including the Directors who are not
interested persons of the Company within the meaning of the 1940 Act
("interested persons"), recommend that the shareholders of the Fund approve
Proposal 1. If Proposal 1 is not approved, the Directors of the Company will
continue the management of the Fund and may consider other alternatives in the
best interest of the shareholders of the Fund.
PROPOSAL 2
TO CHANGE THE CLASSIFICATION
OF THE POLICY REGARDING INVESTMENTS
IN OPTIONS FROM FUNDAMENTAL TO NONFUNDAMENTAL
The Fund is currently subject to the investment policy set forth below
which, among others, the Fund originally designated as a "fundamental" policy,
i.e., a policy only changeable by shareholder vote. The Directors of the
Company after careful consideration and analysis have concluded that it is not
in the best interest of the Fund to continue this designation for this
investment policy. A fundamental policy which may only be altered by
shareholder vote by its nature inhibits the ability of a fund's management to
respond quickly to changing market conditions or revised regulations or
policies affecting the industry. The Directors recognize that certain policies
should be changeable only by the investors themselves. On the other hand, the
Directors believe that other policies do not fit within this category in
today's rapidly changing investment environment. The Directors believe that the
investment policy regarding options should be characterized as nonfundamental
for the reasons set forth herein and recommend that the shareholders approve
the elimination of the fundamental characteristics of such policy.
Under the current fundamental policy, the Fund:
"may not (1) write call options which are not covered options; [or] (2)
write put options, except covered put options or put options to close out
option positions previously entered into . . ."
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The proposal is to change the character of this policy from fundamental to
nonfundamental. If the change is approved, the Fund expects to adopt a
nonfundamental policy:
"not to engage in transactions in options except in connection with options
on securities, securities indices, currencies and interest rates, and
options on futures on securities, securities indices, currencies and
interest rates."
The Directors have concluded that it is in the best interest of the Fund
to change the character of the policy on options from fundamental to
nonfundamental. The Directors believe that the change to a nonfundamental
policy and the revisions to the policy will provide the Fund with additional
flexibility to address market, regulatory or other developments regarding
options as they occur in the future. No imminent change in current practices is
anticipated. The Fund intends to implement and monitor the operation of the new
policy and to change it, as developments warrant. Assuming the proposal is
approved, such change could then be accomplished without the delay and expense
of soliciting shareholder approval.
The Directors, including the Directors who are not interested persons,
recommend a vote FOR approval of this proposal. If the proposal is not approved
by the shareholders, the Fund's present investment policy will remain in
effect.
PROPOSAL 3
TO AMEND THE FUND'S FUNDAMENTAL
POLICY REGARDING INVESTMENTS IN
COMMODITIES AND COMMODITY CONTRACTS
The fundamental policy regarding commodities and commodity contracts
currently reads as follows for the Fund. Under the policy, the Fund may not:
"invest in commodities or commodity contracts, except that the Fund may
purchase stock index, interest rate, and currency futures contracts, may
write covered stock index, interest rate and currency futures contracts,
may write covered put and call options on such futures contracts, and may
enter into closing transactions with respect to options on such futures
contracts."
In order to clarify this policy as well as provide greater flexibility as
regards investments in commodities and commodity contracts, the Directors
propose that the shareholders adopt the following revised fundamental policy,
under which it would be the Fund's policy:
"not to invest in physical commodities or physical commodity contracts or
options in excess of 10% of the Fund's total assets, except that
investments in essentially financial items or arrangements such as, but not
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limited to, swap arrangements, hybrids, currencies, currency and other
forward contracts, delayed delivery and when issued contracts, futures
contracts and options on futures contracts on securities, securities
indices, interest rates and currencies, shall not be deemed investments in
commodities or commodities contracts."
The proposed policy would clarify that certain arrangements and newer
kinds of mixed instruments which involve futures and other commodities are
permissible. With the growth of the investment industry, more complex
arrangements are being presented for investment consideration. For example, an
issuer may find it advantageous to lock-in current interest rates by agreeing
to make delayed delivery of securities months or years from now, and the Fund
may find the terms of such arrangements favorable as an investment. The Fund
could decide that such an investment is attractive because of its view of
future interest rates, the interim earnings to be made on the funds until the
future delivery is made, the actual stated interest rate on the bonds, and
similar analytical considerations. The proposed policy would make clear that
such delayed delivery contracts are permissible investments. Among other
clarifications, the proposed policy would also make clear that currencies are
not regarded as commodities and that limited investments in physical
commodities are allowed, although the Fund has no present intention to make
such investments.
The Directors and SSRM are familiar with the risks inherent in certain of
the investments covered by the proposed policy and, if the proposed policy is
adopted by the shareholders, they intend to act accordingly in the
implementation thereof. No imminent change in current practices is anticipated.
The Directors, including the Directors who are not interested persons,
recommend a vote FOR approval of this proposal. If the proposal is not approved
by the shareholders, the Fund's present investment policy will remain in
effect.
PROPOSAL 4
TO AMEND THE FUND'S FUNDAMENTAL POLICY
RELATING TO SECURITIES LENDING
Under its current fundamental policy, the Fund
"may not make loans, provided, however, that this restriction shall not
prohibit the Fund from (a) entering into repurchase agreements. . ., (b)
purchasing bonds, notes, debentures or other obligations of a character
customarily purchased by institutional or individual investors (whether or not
publicly distributed) and (c) making loans of its portfolio securities which do
not thereupon cause in excess of 20% of the value of the Fund's total assets to
consist of loaned securities. . .")
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The Directors propose that the policy be revised so that it will be the
policy of the Fund:
"not to lend money directly to natural persons; however, the Fund may lend
portfolio securities and purchase bonds, debentures, notes, bills and any other
debt-related instruments or interests directly from the issuer thereof or in
the open market and may enter into repurchase transactions collateralized by
obligations of the U.S. Government and its agencies and instrumentalities or
other high quality securities."
If the proposed revised policy is adopted by the shareholders, the Fund
would be able, under current regulatory positions, to lend portfolio securities
up to a maximum in value of 33 1/3 % of its total assets (including in total
assets the value of the collateral received from the lending of such
securities). The Fund's current policy limits such lending to 20% of the Fund's
total assets. The revised policy would therefore provide the Fund with
additional flexibility to engage in securities lending. While any such loan is
outstanding, it will be continuously secured by collateral in the form of cash
or cash equivalents (e.g., U.S. Government obligations) equal at all times to at
least 100% of the current market value of the loaned securities plus accrued
interest. Collateral received by the Fund will generally be invested in quality
short-term unaffiliated mutual funds, securities issued or guaranteed by the
U.S. Government or its agencies or instrumentalities, irrevocable stand-by
letters of credit issued by a bank or repurchase agreements, among similar
investments. The investing of cash collateral received from loaning portfolio
securities involves leverage which magnifies the potential for gain or loss on
monies invested and, therefore, results in an increase in the volatility of the
Fund's outstanding securities. Such loans may be terminated at any time. The
transactions are generally structured so that the Fund will retain rights to
dividends, interest or other distributions on the loaned securities. Voting
rights pass with the lending, although the Fund may call loans to vote proxies
if desired. Should the borrower of the securities fail financially, there is a
risk of delay in recovery of the securities or loss of rights in the collateral.
Loans would be made only to borrowers which are deemed by SSRM to be of good
financial standing. The Fund has no intention of making loans of portfolio
securities to individuals.
The Directors, including the Directors who are not interested persons,
recommend a vote FOR approval of this proposal. If the proposal is not approved
by the shareholders, the Fund's present investment policy will remain in
effect.
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PROPOSAL 5
TO AMEND THE FUND'S FUNDAMENTAL POLICY
REGARDING INDUSTRY CONCENTRATION
The fundamental policy of the fund regarding industry concentration reads
as follows:
The Fund may not make any investment which would thereupon cause more
than 25% of the value of the total assets of the Fund to be invested in
securities issued by companies principally engaged in any one industry,
provided, however, that (a) utilities will be divided according to their
services so that, for example, gas, gas transmission, electric and
telephone will each be deemed a separate industry, (b) oil and oil related
companies will be divided by type so that, for example, domestic crude oil
and gas producers, domestic integrated oil companies, international oil
companies and oil service companies will each be deemed a separate
industry, and (c) savings and loan associations and finance companies will
each be deemed a separate industry. To the extent that 25% of the total
assets of the Fund may become invested in the four oil related industries
listed above in the aggregate, such fact will be disclosed. For purposes of
this limitation, all debt securities issued by foreign governments, their
agencies or instrumentalities will be treated as foreign government debt
and all debt securities issued by supranational organizations will be
treated as supranational debt.
For reasons set forth below, the Fund proposes to amend the policy for the
Fund to read as follows: The policy of the Fund would be:
"not to make any investment which would cause more than 25% of the value of
the Fund's total assets to be invested in the securities of issuers
principally engaged in any one industry, as based on industry
classifications as may be described in the Fund's Prospectus or Statement
of Additional Information, as amended from time to time."
Because the current policy contains specific examples of how a few
industries would be defined, it could be misconstrued as inferring that no
other kinds of distinctions would be made for other industries. The Fund in
fact has always reserved the right to define industries as appropriate over
time on the basis of evolutionary changes in businesses. For example, the
burgeoning growth of asset-backed securities has resulted in new industry
classifications for these securities based on the nature of the underlying
assets, such as equipment and automobile financing obligations, automobile
leases, and credit card receivables. Finance companies may be classified
according to the industries of their parent companies or industries that
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otherwise most affect such financing companies. The change in the policy would
make clear that the Fund will define and redefine industries over time as
business directions dictate.
The Directors, including the Directors who are not interested persons,
recommend a vote FOR approval of this proposal. If the proposal is not approved
by the shareholders of the Fund, the Fund's present investment policy will
remain in effect.
PROPOSAL 6
(FOR CLASS S SHAREHOLDERS OF THE FUND ONLY) TO INCLUDE CLASS S SHARES UNDER
THE FUND'S PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
The Board of Directors proposes to include Class S shares of the Fund under
the Fund's Plan of Distribution Pursuant to Rule 12b-1. A copy of the amended
and restated plan (the "Amended and Restated Plan") is set forth as Exhibit B to
this Proxy Statement. However, Class S shareholders will not incur any direct
expense under the Amended and Restated Plan.
The Fund has adopted multiple classes of shares (Classes A, B(1), B, C, and
S) and related distribution plans applicable, currently, to Classes A, B(1), B
and C. Under the distribution plans, SSRIS may use distribution fees received
from the Fund to pay distribution expenditures, including compensation to
brokers and other financial intermediaries who have sold the shares and/or who
provide continuing personal services, to shareholders. Under the distribution
plans, SSRIS is also authorized to make payments for distribution purposes out
of its own profits or funds from any other source with respect to Classes A,
B(1), B and C. With approval of the inclusion of Class S shares under the
Amended and Restated Plan, Class S shareholders would not pay any direct fees;
however, SSRIS will be authorized to use its own assets for the distribution of
Class S shares as described below.
Description of the Amended and Restated Plan
Rule 12b-1 under the 1940 Act provides that an investment company may not
finance, directly or indirectly, any activity which is primarily intended to
result in the sale of shares issued by such company, unless it has adopted a
distribution plan pursuant to such Rule. The Amended and Restated Plan
authorizes the Distributor to make payments out of its general profits, revenues
and other sources to underwriters, securities dealers and others in connection
with sales of shares, including Class S shares, to the extent, if any, that
such payments may be construed in the future to constitute the indirect use of
Fund assets to finance the sale of Fund shares and deemed to be within the scope
of Rule 12b-1 under the Act. The Amended and Restated Plan does not authorize
23
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any direct fees to be charged against Class S shares and may not be amended to
provide for such charge without approval by a 1940 Act Majority Vote of the
Class S shares of the Fund.
The Amended and Restated Plan may be terminated at any time with respect to
Class S shares either by vote of a majority of the Directors who are not
"interested persons" (as defined in the 1940 Act) of the Company and who have no
direct or indirect financial interest in the Amended and Restated Plan's
operation or in any related agreements ("Qualified Directors") or by a 1940 Act
Majority Vote of the Class S shares of the Fund. It may remain in effect with
respect to Class S shares of the Fund even if it has been terminated with
respect to the other classes of shares of the Fund.
Continuance, amendment or termination of the Amended and Restated Plan is
also subject to the approval of the Qualified Directors. The Amended and
Restated Plan with respect to the Fund was last approved by the Board of
Directors of the Company as a whole including the Qualified Directors in
November, 1998.
If approved at the Meeting, the Amended and Restated Plan and any related
agreements will apply with respect to the Class S shareholders of the Fund and
will continue to be in effect from year to year for so long as such continuance
is specifically approved at least annually by votes of a majority of the full
Board of Directors and of the Qualified Directors, cast in person at a meeting
called for that purpose.
During the fiscal year ended October 31, 1998, Classes A, B, and C of the
Fund paid in the aggregate $278,228 in distribution fees, all to SSRIS.
Consideration by Directors
The Directors do not believe that payments by the Fund under any existing
agreement constitute the direct or indirect financing of any activity primarily
intended to result in the sale of the Fund's Class S shares; however, because of
uncertainty concerning the interpretation and application of Rule 12b-1, the
Directors have determined that the Amended and Restated Plan should authorize
such payments as a protective measure in the event any such payment is construed
to constitute such financing through the indirect use of Class S assets. The
Board of Directors of the Company, as a whole and the Qualified Directors, have
concluded, in the exercise of their reasonable business judgment and in light of
their fiduciary duties under Maryland law and under the 1940 Act, that there is
a reasonable likelihood that the Amended and Restated Plan will benefit the Fund
and its shareholders.
The Directors, including the Qualified Directors, recommend a vote FOR
approval of the Amended and Restated Plan.
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NO ANNUAL MEETINGS OF SHAREHOLDERS
There will be no annual or further special meetings of shareholders of the
Company unless required by applicable law or called by the Directors in their
discretion. In accordance with the Restated Articles of Incorporation, any
Director may be removed by a vote of shareholders holding a majority of the
shares of the Trust entitled to be cast for the election of Directors. In
addition, if ten or more shareholders who have been such for at least six months
and who hold in the aggregate shares with a net asset value of at least $25,000
or at least 1% of the outstanding shares of the Company, inform the Directors
that they wish to communicate with other shareholders, the Directors will either
give such shareholders access to the shareholder list or inform them of the cost
involved if the Company forwards material to shareholders on their behalf. If
the Directors object to mailing such materials, they must inform the Commission
and thereafter comply with the requirements of the 1940 Act.
Shareholders wishing to submit proposals for inclusion in a proxy
statement for a subsequent shareholder meeting should send their written
proposals to the Secretary of the Company, One Financial Center, Boston,
Massachusetts 02111. Shareholder proposals should be received in a reasonable
time before the solicitation is made.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE FILL IN, DATE AND
SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. NO
POSTAGE IS NECESSARY IF IT IS MAILED IN THE UNITED STATES. CERTAIN SHAREHOLDERS
MAY ALSO VOTE BY TELEPHONE; PLEASE SEE PAGES 3 AND 4 FOR DETAILS.
February 22, 1999
25
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EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
AND LIQUIDATION
AGREEMENT AND PLAN OF REORGANIZATION AND LIQUIDATION dated as of February
21, 1999 by and between State Street Research Portfolios, Inc., a Maryland
corporation (the "Company"), on behalf of the State Street Research
International Equity Fund, a series of the Company (the "Acquired Fund"), and
State Street Research Financial Trust, a Massachusetts business trust (the
"Trust"), on behalf of State Street Research International Equity Fund, a
series of the Trust (the "Acquiring Fund").
W I T N E S S E T H:
WHEREAS, each of the Company and the Trust is an open-end management
investment company registered under the Investment Company Act of 1940, as
amended (the "1940 Act");
WHEREAS, this Agreement is intended to be, and is adopted as, a plan of
reorganization and liquidation within the meaning of Section368(a)(1)(F) of the
Internal Revenue Code of 1986, as amended, such reorganization to consist of
the transfer of all of the assets of the Acquired Fund in exchange solely for
Class A, Class B(1), Class B, Class C and Class S shares of beneficial
interest, $.001 par value per share, of the Acquiring Fund ("Acquiring Fund
Shares") and the assumption by the Acquiring Fund of certain liabilities of the
Acquired Fund and the distribution, after the Closing hereinafter referred to,
of Acquiring Fund Shares to the shareholders of the Acquired Fund in
liquidation of the Acquired Fund, all upon the terms and conditions hereinafter
set forth in this Agreement (collectively, the "Reorganization").
NOW, THEREFORE, in consideration of the mutual promises herein contained,
the parties hereto agree as follows:
1. Transfer of Assets. Subject to the terms and conditions set forth
herein, at the closing provided for in Section 5 (the "Closing") the Company,
on behalf of the Acquired Fund, shall transfer all of the assets of the
Acquired Fund, and assign all Assumed Liabilities (as hereinafter defined) to
the Acquiring Fund, and the Trust on behalf of the Acquiring Fund shall acquire
all such assets, and shall assume all such Assumed Liabilities, upon delivery
to the Company on behalf of the Acquired Fund of Acquiring Fund Shares (both
full and fractional) of each class (the "New Shares") having a net asset value
equal to the value of the net assets of the corresponding class of shares of
the Acquired Fund transferred. The aggregate number of New Shares of each class
delivered to the Company shall equal the number of shares of the corresponding
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class of the Acquired Fund outstanding as of the close of business on the
Valuation Date. "Assumed Liabilities" shall mean those liabilities, including
all expenses, costs, charges and reserves, reflected in an unaudited statement
of assets and liabilities of the Acquired Fund as of the close of business on
the Valuation Date (as hereinafter defined), determined in accordance with
generally accepted accounting principles consistently applied from the prior
audited period. The net asset value of each class of the New Shares and the
value of the net assets of each class of shares of the Acquired Fund to be
transferred shall be determined as of the close of regular trading on the New
York Stock Exchange on the business day next preceding the Closing (the
"Valuation Date") using the valuation procedures set forth in the then current
prospectus and statement of additional information of the Acquired Fund. All
Assumed Liabilities of the Acquired Fund, to the extent that they exist at or
after the Closing, shall after the Closing attach to the Acquiring Fund and may
be enforced against the Acquiring Fund to the same extent as if the same had
been incurred by the Acquiring Fund.
2. Shareholder Actions. Immediately upon delivery to the Acquired Fund of
the New Shares, the Acquired Fund, as the then sole shareholder of the
Acquiring Fund, shall approve an Investment Management Agreement between the
Trust, on behalf of the Acquiring Fund and State Street Research & Management
Company (the "Investment Manager").
3. Distribution of New Shares; Liquidation of the Acquired Fund. At or as
soon as practicable after the Closing, the Acquired Fund will be liquidated and
the New Shares that have been delivered to the Company on behalf of the Acquired
Fund will be distributed to the shareholders of record of the Acquired Fund as
of the close of business on the Valuation Date, each shareholder to receive a
number of New Shares of each class equal to the number of shares of the
corresponding class of the Acquired Fund held by such shareholder as of the
close of business on the Valuation Date. Such liquidation and distribution will
be accompanied by the establishment of an open account on the share records of
the Acquiring Fund in the name of each shareholder of the Acquired Fund and
representing the respective number of New Shares due such shareholder. The
shareholders of record of the Acquired Fund as of the close of business on the
Valuation Date shall be certified by the Company's transfer agent. As soon as
practicable after the Closing, the Company shall take all steps necessary to
effect a complete liquidation of the Acquired Fund and shall file such
instruments, if any, as are necessary to effect the dissolution of the Company
and its deregistration under the Investment Company Act of 1940, as amended and
shall take all other steps necessary to effect such dissolution and
deregistration. As of the Closing, each outstanding certificate which, prior to
the Closing, represented shares of the Acquired Fund will be deemed for all
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purposes to evidence ownership of the number of Acquiring Fund Shares issuable
with respect thereto pursuant to the Reorganization. After the Closing,
certificates originally representing shares of Class A or Class S of the
Acquired Fund will be rendered nonnegotiable; upon special request and surrender
of such certificates to State Street Bank and Trust Company as transfer agent,
holders of these nonnegotiable certificates shall be entitled to receive
certificates representing the number of Acquiring Fund Shares issuable with
respect thereto. All Class B(1), Class B and Class C shares of the Acquiring
Fund are held of record in book entry form and no certificates for such shares
will be issued.
4. Representations and Warranties.
(a) The Company, on behalf of the Acquired Fund, hereby represents and
warrants to the Acquiring Fund as follows:
(i) the Company is duly organized, validly existing and in good
standing under the laws of the State of Maryland and has full power and
authority to conduct its business as presently conducted;
(ii) the Company has full power and authority to execute, deliver
and carry out the terms of this Agreement on behalf of the Acquired Fund;
(iii) the execution and delivery of this Agreement on behalf of
the Acquired Fund and the consummation of the transactions contemplated
hereby are duly authorized and no other proceedings on the part of the
Company or the shareholders of the Acquired Fund (other than as
contemplated in Section 5(f)) are necessary to authorize this Agreement
and the transactions contemplated hereby;
(iv) this Agreement has been duly executed by the Company on
behalf of the Acquired Fund and constitutes its valid and binding
obligation, enforceable in accordance with its terms, subject to
applicable bankruptcy, reorganization, insolvency, moratorium and other
rights affecting creditors' rights generally, and general equitable
principles;
(v) neither the execution and delivery of this Agreement by the
Company on behalf of the Acquired Fund, nor the consummation by the
Company on behalf of the Acquired Fund of the transactions contemplated
hereby will conflict with, result in a breach or violation of or
constitute (or with notice, lapse of time or both) a breach of or default
under, the Restated Articles of Incorporation or By-Laws of the Company,
as each may be amended, or any statute, regulation, order, judgment or
decree, or any instrument, contract or other agreement to which the
Company is a party or by which the Company or any of its assets is subject
or bound; and
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(vi) no authorization, consent or approval of any governmental or
other public body or authority or any other party is necessary for the
execution and delivery of this Agreement by the Company on behalf of the
Acquired Fund or the consummation of any transactions contemplated hereby
by the Company, other than as shall be obtained at or prior to the
Closing.
(b) The Trust, on behalf of the Acquiring Fund, hereby represents and
warrants to the Acquired Fund as follows:
(i) The Trust is duly organized, validly existing and in good
standing under the laws of The Commonwealth of Massachusetts and has full
power and authority to conduct its business as presently conducted;
(ii) The Trust has full power and authority to execute, deliver
and carry out the terms of this Agreement on behalf of the Acquiring Fund;
(iii) the execution and delivery of this Agreement on behalf of
the Acquiring Fund and the consummation of the transactions contemplated
hereby are duly authorized and no other proceedings on the part of the
Trust or the shareholders of the Acquiring Fund are necessary to
authorize this Agreement and the transactions contemplated hereby;
(iv) this Agreement has been duly executed by the Trust on behalf
of the Acquiring Fund and constitutes its valid and binding obligation,
enforceable in accordance with its terms, subject to applicable
bankruptcy, reorganization, insolvency, moratorium and other rights
affecting creditors' rights generally, and general equitable principles;
(v) neither the execution and delivery of this Agreement by the
Trust on behalf of the Acquiring Fund, nor the consummation by the Trust
on behalf of the Acquiring Fund of the transaction contemplated hereby
will conflict with, result in a breach or violation of or constitute (or
with notice, lapse of time or both constitute) a breach of or default
under, the First Amended and Restated Master Trust Agreement (the "Master
Trust Agreement") or By-Laws of the Trust, as each may be amended, or any
statute, regulation, order, judgment or decree, or any instrument,
contract or other agreement to which the Trust is a party or by which the
Trust or any of its assets is subject or bound; and
(vi) no authorization, consent or approval of any governmental or
other public body or authority or any other party is necessary for the
execution and delivery of this Agreement by the Trust on behalf of the
29
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Acquiring Fund or the consummation of any transactions contemplated hereby
by the Trust, other than as shall be obtained at or prior to the Closing.
5. Conditions Precedent. The obligations of the Company on behalf of the
Acquired Fund and the Trust on behalf of the Acquiring Fund to effectuate the
Reorganization shall be subject to the satisfaction of the following
conditions:
(a) A post-effective amendment to the registration statement of the
Acquiring Fund on Form N-1A under the Securities Act of 1933, as amended
(the "Securities Act"), registering the New Shares under the Securities
Act, and such amendment or amendments thereto as are determined by the
Board of Trustees of the Trust to be necessary and appropriate to effect
such registration of the New Shares (the "Post-Effective Amendment"), shall
have been filed with the Securities and Exchange Commission (the
"Commission") and the Post-Effective Amendment shall have become effective,
and no stop-order suspending the effectiveness of the Post-Effective
Amendment shall have been issued, and no proceeding for that purpose shall
have been initiated or threatened by the Commission (and not withdrawn or
terminated);
(b) The New Shares shall have been duly qualified for offering to the
public in all states in which such qualification is required for
consummation of the transactions contemplated hereunder;
(c) All representations and warranties of the Company on behalf of the
Acquired Fund contained in this Agreement shall be true and correct in all
material respects as of the date hereof and as of the Closing, with the
same force and effect as if then made, and the Trust on behalf of the
Acquiring Fund shall have received a certificate of an officer of the
Company acting on behalf of the Acquired Fund to that effect in form and
substance reasonably satisfactory to the Trust on behalf of the Acquiring
Fund;
(d) All representations and warranties of the Trust on behalf of the
Acquiring Fund contained in this Agreement shall be true and correct in all
material respects as of the date hereof and as of the Closing, with the
same force and effect as if then made, and the Company on behalf of the
Acquired Fund shall have received a certificate of an officer of the Trust
acting on behalf of the Acquiring Fund to that effect in form and substance
reasonably satisfactory to the Company on behalf of the Acquired Fund;
(e) The Company on behalf of the Acquired Fund and the Trust on behalf
of the Acquiring Fund shall have received an opinion from Goodwin, Procter
& Hoar LLP regarding certain tax matters in connection with the
Reorganization; and
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(f) A vote approving this Agreement shall have been adopted by at least
a majority of the outstanding Class A, Class B(1), Class B, Class C and
Class S shares of common stock of the Acquired Fund, all classes voting
together, entitled to vote at a special meeting of shareholders of the
Acquired Fund duly called for such purpose (the "Special Meeting").
6. Closing. The Closing shall be held at the offices of the Trust and
shall occur (a) immediately prior to the opening of business on the first
Monday following the satisfaction or waiver of all conditions to the
Reorganization or (b) at such later time as the parties may agree. All acts
taking place at the Closing shall be deemed to take place simultaneously unless
otherwise provided in this Agreement.
7. Expenses. The expenses incurred in connection with the transactions
contemplated by this Agreement, whether or not the transactions contemplated
hereby are consummated, will be borne by the Acquired Fund.
8. Termination. This Agreement and the transactions contemplated hereby
may be terminated and abandoned by resolution of the Board of Trustees of the
Trust or by resolution of the Board of Directors of the Company, at any time
prior to the Closing, if circumstances should develop that, in the opinion of
the Board of Trustees or the Board of Directors, in the sole discretion of
either, make proceeding with this Agreement inadvisable. In the event of any
such termination, there shall be no liability for damages on the part of either
the Acquired Fund or the Acquiring Fund, or their respective directors,
trustees or officers, to the other party or its directors, trustees or
officers.
9. Amendments. This Agreement may be amended, waived or supplemented in
such manner as may be mutually agreed upon in writing by the authorized
officers of the Company acting on behalf of the Acquired Fund and by the
authorized officers of the Trust acting on behalf of the Acquiring Fund;
provided, however, that following the Special Meeting, no such amendment,
waiver or supplement may have the effect of changing the provisions for
determining the number of Acquiring Fund Shares to be issued to the Acquired
Fund shareholders under this Agreement to the detriment of such shareholders
without their further approval.
10. Governing Law. This Agreement shall be governed and construed in
accordance with the laws of The Commonwealth of Massachusetts, except as to
matters of conflicts of laws.
11. Further Assurances. Each of the Company and the Trust shall take such
further action, prior to, at, and after the Closing, as may be necessary or
desirable and proper to consummate the transactions contemplated hereby.
12. Limitations of Liability. The term "Trust" means and refers to the
trustees from time to time serving under the Master Trust Agreement of the
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Trust, as the same may subsequently thereto have been, or subsequently hereto
be, amended. It is expressly agreed that the obligations of the Trust hereunder
shall not be binding upon any of the Trustees, shareholders, nominees,
officers, agents or employees of the Trust, personally, but bind only the
assets and property of the Acquiring Fund series of the Trust as provided in
the Master Trust Agreement of the Trust. The execution and delivery of this
Agreement have been authorized by the Trustees of the Trust and signed by an
authorized officer of the Trust, acting as such, and neither such authorization
nor such execution and delivery shall be deemed to have been made individually
or to impose any personal liability, but shall bind only the trust property of
the Trust as provided in its Master Trust Agreement. The Master Trust Agreement
of the Trust provides, and it is expressly agreed, that each Sub-Trust of the
Trust shall be charged with the liabilities in respect of that Sub-Trust and
all expenses, costs, charges or reserves belonging to that Sub-Trust.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first set forth above by their duly authorized
representatives.
STATE STREET RESEARCH FINANCIAL TRUST,
on behalf of State Street Research
International Equity Fund
By: /s/ Ralph F. Verni
-----------------------------------
Ralph F. Verni
Chairman of the Board, President and
Chief Executive Officer
STATE STREET RESEARCH PORTFOLIOS, INC.,
on behalf of State Street Research
International Equity Fund
By: /s/ Peter C. Bennett
-----------------------------------
Peter C. Bennett
Vice President
32
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EXHIBIT B
STATE STREET RESEARCH PORTFOLIOS, INC.
FIRST AMENDED AND RESTATED PLAN OF
DISTRIBUTION PURSUANT TO RULE 12b-1
WHEREAS, State Street Research Portfolios, Inc. (the "Corporation"), a
Maryland corporation, engages in business as an open-end management investment
company and is registered as such under the Investment Company Act of 1940, as
amended (the "Act");
WHEREAS, the Corporation is authorized to issue shares of beneficial
interest (the "Shares") in separate series, with the Shares of each such series
representing the interests in a separate portfolio of securities and other
assets; and
WHEREAS, the Corporation currently consists of one portfolio series, the
State Street International Equity Fund, (being referred to herein as the
"Initial Fund" - such series, together with any other series subsequently
established by the Corporation and made subject to this Plan, being referred to
herein individually as a "Fund" and collectively as the "Funds"); and
WHEREAS, the Corporation may be deemed a distributor of the Shares within
the meaning of Rule 12b-1 under the Act, and has adopted a Plan of Distribution
dated November18, 1993 (the "Original Plan") and a related Distribution
Agreement with State Street Research Investment Services, Inc., the
Corporation's principal underwriter (the "Distributor") pursuant to such Rule
(respectively, the "Plan" and the "Agreement"); and
WHEREAS, the Corporation desires to adopt a First Amended and Restated
Plan of Distribution pursuant to Rule 12b-1 (the "Plan") to reflect changes in
the designation of the classes of the Fund and certain other changes to the
Plan; and
WHEREAS, the Board of Directors as a whole, and the Directors who are not
interested persons of the Funds of the Corporation (as defined in the Act) and
who have no direct or indirect financial interest in the operation of this Plan
or the Agreement and any agreements relating to it (the "Qualified Directors"),
having determined, in the exercise of their reasonable business judgment and in
light of their fiduciary duties under state law and under Section 36(a) and (b)
of the Act, that there is a reasonable likelihood that this Plan and the
Agreement will benefit the Initial Fund and its shareholders, have accordingly
approved this Plan and the Agreement by votes cast in person at a meeting
called for the purpose of voting on this Plan and the Agreement and any
agreements related thereto.
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NOW, THEREFORE, the Corporation hereby adopts this Plan in accordance with
Rule 12b-1 under the Act, on the following terms and conditions:
SECTION 1. DISTRIBUTION ACTIVITIES
Subject to the supervision of the Board of Directors, the Corporation may
engage, directly or indirectly, in financing any activities primarily intended
to result in the sale of Shares, including, but not limited to, the following:
(1) payment of commissions and/or reimbursement to underwriters, securities
dealers and others engaged in the sale of Shares, including payments to the
Distributor to be used to pay commissions and/or reimbursement to securities
dealers and others (including affiliates of the Distributor) engaged in the
distribution and marketing of Shares or furnishing assistance to investors on an
ongoing basis, (2) reimbursement of direct out-of-pocket expenditures incurred
by the Distributor in connection with the distribution and marketing of Shares,
including expenses relating to the formulation and implementation of marketing
strategies and promotional activities such as direct mail promotions and
television, radio, newspaper, magazine and other mass media advertising, the
preparation, printing and distribution of sales literature, the preparation,
printing and distribution of Prospectuses of the Funds of the Corporation and
reports for recipients other than existing shareholders of the Corporation, and
obtaining such information, analyses and reports with respect to marketing and
promotional activities and investor accounts as the Corporation may, from time
to time, deem advisable, and (3) reimbursement of expenses incurred by the
Distributor in connection with the servicing of shareholder accounts, including
payments to securities dealers and others in consideration of the provision of
personal service to investors and/or the maintenance of shareholder accounts and
expenses associated with the provision of personal service by the Distributor
directly to investors. In addition, the Plan shall be deemed to authorize the
Distributor and State Street Research & Management Company (the "Adviser") to
make payments out of general profits, revenues and other sources to
underwriters, securities dealers and others in connection with sales as
described in the Prospectus of the Corporation as from time to time amended and
in effect (for purposes hereof, references to the Prospectus of the Corporation
shall be deemed to include all Prospectuses of the Corporation), to the extent,
if any, that such payments may be deemed to be within the scope of Rule 12b-1
under the Act.
The Corporation and its Funds are authorized to engage in the activities
listed above, and in other activities primarily intended to result in the sale
of Shares, either directly or through other persons with which the Corporation
has entered into agreements pursuant to the Plan.
SECTION 2. MAXIMUM EXPENDITURES
The expenditures to be made by the Initial Fund pursuant to this Plan and
the basis upon which payment of such expenditures will be made shall be
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determined by the Initial Fund, but in no event may such expenditures exceed
the following: (i) with respect to Class A Shares of the Initial Fund, an
annual rate of .25% of the average daily value of net assets represented by
such Class A shares, (ii) with respect to Class B Shares and Class C Shares of
the Initial Fund, an annual rate of .75% of the average daily value of the net
assets represented by such Class B or Class C shares (as the case may be) to
finance sales or promotion expenses and an annual rate of .25% of the average
daily value of the net assets represented by such Class B or Class C shares (as
the case may be) to make payments for personal service and/or the maintenance
of shareholder accounts, and (iii) with respect to any Fund subsequently
established by the Corporation and made subject to this Agreement, the annual
rate as agreed upon and specified in an addendum hereto; plus such amounts as
the Distributor and Adviser may expend from general revenues, profits and other
sources from time to time in accordance with the last sentence of Section 1 and
the second paragraph of Section 3. The expenditures to be made pursuant to this
Plan shall commence with respect to each class of Shares of a Fund as of the
date on which this Plan becomes effective with respect to each such class.
SECTION 3. PAYMENTS
Pursuant to this Plan, the Corporation shall make periodic payments to the
Distributor at the annual rate provided for in Section 2 with respect to each
Fund, or class of Shares thereof. The Distributor shall in turn remit to and
allocate among selected dealers (including those that are affiliates of the
Distributor) who have entered into selected dealer agreements with the
Distributor, in consideration of and as reimbursement for expenses incurred in
the provision of distribution and marketing services and furnishing assistance
to investors on an ongoing basis, such amounts as are required pursuant to such
selected dealer agreements and as indicated in the Prospectus of the
Corporation. Any amounts received by the Distributor and not so allocated may
be applied by the Distributor as reimbursement for expenses incurred in
connection with the distribution and marketing of Shares of each class and the
servicing of investor accounts as contemplated by Section 1(2) hereof. The
distribution and servicing expenses of a particular class will be borne solely
by that class and no Fund will use fees charged to one class within a Fund to
support the marketing or servicing relating to any other class of Shares within
the Fund or any other Fund. Any amounts received by the Distributor hereunder
and not applied as provided herein shall be returned to the applicable class or
Fund of the Corporation.
The Distributor and the Adviser may also make payments to authorized
securities dealers as specified in the Prospectus of the Corporation as from
time to time amended and in effect, from its general profits, revenues and
other sources. Amounts received by the Distributor from any Fund in respect of
35
<PAGE>
any class of Shares shall not be used to pay any commission expenses related to
the sale of any other class of Shares of such Fund.
Notwithstanding anything to the contrary herein, the aggregate of all
payments to the Distributor to finance sales or promotion expenses with respect
to the Class B or the Class C shares pursuant to this Section 3 together with
any contingent deferred sales charges received by the Distributor in connection
with the redemption of shares of the respective class shall not exceed the
amount expended by the Distributor to finance sales or promotion expenses of
such class.
SECTION 4. TERM AND TERMINATION
A. Initial Fund. This Plan shall be deemed effective with respect to Class
A, Class B, Class C and Class S shares of the Initial Fund on the later of (i)
the date on which the Initial Fund commences offering such class of shares to
the public and (ii) the date on which the Plan is approved by vote of a majority
of the outstanding voting securities of such class, if required under applicable
law and shall continue in effect with respect to each Initial Fund (subject to
Section 4(c) hereof) until one year from the date of such effectiveness, unless
the continuation of this Plan shall have been approved with respect to the
Initial Funds in accordance with the provisions of Section 4(c) hereof.
B. Additional Funds. This Plan shall become effective with respect to
each additional Fund or class thereof other than the Initial Fund established
by the Corporation after the date hereof and made subject to this Plan upon
commencement of the initial public offering thereof (provided that the Plan has
previously been approved for continuation by votes of a majority of both (i)
the Board of Directors of the Corporation and (ii) the Qualified Directors,
cast in person at a meeting held before the initial public offering of such
additional Fund or classes thereof and called for the purpose of voting on such
approval), and shall continue in effect with respect to each such additional
Fund or Class (subject to Section 4(c) hereof) for one year thereafter, unless
the continuation of this Plan shall have been approved with respect to such
additional Fund or Class in accordance with the provisions of Section 4(c)
hereof. The Distributor and the Corporation on behalf of each such additional
Fund or Class shall each sign an addendum hereto agreeing to be bound hereby
and setting forth such specific and different terms as the parties may agree
upon, including, without implied limitation, the amount and purpose of payments
to be made hereunder.
C. Continuation. This Plan and the Agreement shall continue in effect
with respect to each Fund or Class thereof subsequent to the initial term
specified in Section 4(a) and (b) for so long as such continuation is
specifically approved at least annually by votes of a majority of both (i) the
Board of Directors of the Corporation and (ii) the Qualified Directors, cast in
36
<PAGE>
person at a meeting called for the purpose of voting on this Plan, subject to
any shareholder approval requirements existing under applicable law.
D. Termination.
1. This Plan may be terminated at any time with respect to the
Corporation or any Fund or Class thereof, as the case may be, by vote of a
majority of the Qualified Directors, or by vote of a majority of the
outstanding voting securities of the Corporation or that Fund or Class, as the
case may be. The Plan may remain in effect with respect to a Fund or Class
thereof even if it has been terminated in accordance with this Section 4(d)
with respect to such Fund or one or more other Funds of the Corporation.
2. The Agreement may be terminated at any time, without penalty, with
respect to the Corporation or any Fund, as the case may be, by vote of a
majority of the Qualified Directors or by vote of a majority of the outstanding
voting securities of the Corporation or that Fund, as the case may be, on sixty
days' written notice to the Distributor. In addition, the Agreement provides
for automatic termination in the event of its assignment.
SECTION 5. AMENDMENTS
This Plan may not be amended to increase materially the amount of
distribution expenditures provided for in Section 2 hereof unless such
amendment is approved by a vote of a majority of the outstanding voting
securities of each Fund or Class thereof with respect to which a material
increase in the amount of distribution expenditures is proposed, and no
material amendment to the Plan shall be made unless approved in the manner
provided for annual renewal in Section 4(c) hereof. Otherwise, this Plan may be
amended with respect to the Corporation or a Fund or Class thereof by vote of a
majority of the Qualified Directors or the outstanding voting securities of the
Corporation or that Fund or Class, as the case may be.
SECTION 6. INDEPENDENT DIRECTORS
While this Plan is in effect with respect to any Fund, the selection and
nomination of Directors who are not interested persons (as defined in the Act)
of the Corporation shall be committed to the discretion of the Directors who
not interested persons.
SECTION 7. QUARTERLY REPORTS
The Treasurer of the Corporation and the Treasurer of the Distributor
shall provide to the Directors of the Corporation, and the Directors shall
review, at least quarterly, a written report of the amounts expended for
distribution pursuant to this Plan and the purposes for which such expenditures
were made.
37
<PAGE>
SECTION 8. RECORDKEEPING
The Corporation shall preserve copies of this Plan, the Agreement and any
related agreements and all reports made pursuant to Section 7 hereof, for a
period of not less than six years from the date of this Plan and the Agreement,
the agreements or such reports, as the case may be, the first two years in an
easily accessible place.
IN WITNESS WHEREOF, the Corporation and the Distributor have executed this
Plan of Distribution on the day and year set forth below.
STATE STREET RESEARCH PORTFOLIOS, INC.
By:_________________________________
STATE STREET RESEARCH INVESTMENT SERVICES,
INC.
By:_________________________________
Date: ________________ __, 1999
38
<PAGE>
For Faster, More Convenient Voting
Use the Phone
Option 1: Automated Touch Tone Voting: Call toll-free 1-888-221-0697
Option 2: Telephone Rep. Assisted Voting: Call toll-free 1-877-392-4944
Control Number:
Vote this proxy card TODAY! Your prompt response will save your fund the expense
of additional mailings.
STATE STREET RESEARCH INTERNATIONAL EQUITY FUND
Special Meeting of Shareholders - May 14, 1999
The undersigned hereby appoints Ralph F. Verni, Francis J. McNamara,
III and Darman A. Wing, and each of them, as proxies with full power of
substitution to act for and vote on behalf of the undersigned all shares of the
above Fund, which the undersigned would be entitled to vote if personally
present at the Special Meeting of Shareholders to be held at the principal
offices of the Fund, One Financial Center, 31st Floor, Boston, Massachusetts
02111, at 4:00 p.m. on May 14, 1999, or at any adjournments thereof, on the
items described on the other side of this form, as set forth in the Notice of
Special Meeting of Shareholders and the accompanying Proxy Statement dated
February 22, 1999, receipt of which is acknowledged by the undersigned.
PLEASE INDICATE ANY CHANGE OF ADDRESS BELOW. This proxy may be revoked
at any time prior to the exercise of the powers conferred thereby. THIS PROXY IS
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
IF NOT VOTING BY PHONE, IT IS IMPORTANT THAT THIS PROXY BE SIGNED AND
RETURNED IN THE ENCLOSED ENVELOPE.
NOTE: Please date and sign exactly as name or names appear hereon and
return in the enclosed envelope which requires no postage. When signing as
attorney, executor, trustee, guardian or officer of a corporation, please give
title as such.
Signature:______________________ Date:________________________
Signature:______________________ Date:________________________
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
CONTINUED ON REVERSE SIDE
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<PAGE>
If a choice is specified for the proposals, this proxy will be voted as
indicated. IF NO CHOICES ARE SPECIFIED, THIS PROXY WILL BE VOTED FOR ALL
PROPOSALS. In their discretion the proxies are authorized to vote upon such
other business as may properly come before the Meeting. The Board of Directors
recommends a vote FOR all proposals.
1. To approve an Agreement and Plan of Reorganization and Liquidation
between the Fund and State Street Research International Equity
Fund, a newly-created series of State Street Research Financial Trust.
[ ] For [ ] Against [ ] Abstain
2. To change the classification of the policy regarding investments in
options from fundamental to nonfundamental.
[ ] For [ ] Against [ ] Abstain
3. To amend the Fund's fundamental policy regarding investing in
commodities and commodity contracts.
[ ] For [ ] Against [ ] Abstain
4. To amend the Fund's fundamental policy relating to securities lending.
[ ] For [ ] Against [ ] Abstain
5. To amend the Fund's fundamental policy regarding industry concentration.
[ ] For [ ] Against [ ] Abstain
6. (For Class S shareholders only). To include Class S shares under the
Fund's Plan of Distribution Pursuant to Rule 12b-1.
[ ] For [ ] Against [ ] Abstain
I PLAN TO ATTEND
THE MEETING YES [ ] NO [ ]
2
<PAGE>
For Faster, More Convenient Voting
Use the Phone
Option 1: Automated Touch Tone Voting: Call toll-free 1-888-221-0697
Option 2: Telephone Rep. Assisted Voting: Call toll-free 1-877-392-4944
Control Number:
Vote this proxy card TODAY! Your prompt response will save your fund the expense
of additional mailings.
STATE STREET RESEARCH INTERNATIONAL EQUITY FUND
Special Meeting of Shareholders - May 14, 1999
Shares of the State Street Research International Equity Fund (the "Fund"), are
held by The Chase Manhattan Bank, N.A. ("Chase Manhattan") as trustee for the
savings plan in which you participate.
The Fund has called a shareholder meeting (the "Meeting") to consider matters
described in the enclosed Notice of Special Meeting and Proxy Statement dated
February 22, 1999. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
Chase Manhattan is seeking your voting instructions. By signing below, you
hereby instruct Chase Manhattan to vote the shares of the Fund as to which you
are entitled to give instructions, at the Meeting (to be held at the principal
offices of the Company, One Financial Center, 31st Floor, Boston, Massachusetts
02111, at 4:00 p.m. on May 14, 1999, or at any adjournments thereof), as set for
on the other side of this form.
IF NOT VOTING BY PHONE,
IT IS IMPORTANT THAT THIS PROXY BE
SIGNED AND RETURNED IN THE ENCLOSED
ENVELOPE.
NOTE: Please date and sign
exactly as name or names Signature: __________________ Date: _______
appear hereon and return Signature: __________________ Date: _______
in the enclosed envelope
which requires no postage.
When signing as attorney,
executor, trustee, guardian
or officer of acorporation,
please give title as such.
- --------------------------------------------------------------------------------
CONTINUED ON REVERSE SIDE
- --------------------------------------------------------------------------------
<PAGE>
Chase Manhattan will vote the appropriate nubmer of the Fund's shares pursuant
to the instructions given. If no instructions are set forth on the returned form
as to a proposal, Chase Manhattan will "ABSTAIN" as to the proposal (which has
the effect of a withheld vote). The Board of Directors recommends a vote FOR all
proposals.
1. To approve an Agreement and Plan of Reorganization and Liquidation
between the Fund and State Street Research International Equity Fund, a
newly-created series of State Street Research Financial Trust.
[ ] For [ ] Against [ ] Abstain
2. To change the classification of the policy regarding investments in
options from fundamental to nonfundamental.
[ ] For [ ] Against [ ] Abstain
3. To amend the Fund's fundamental policy regarding investing in
commodities and commodity contracts.
[ ] For [ ] Against [ ] Abstain
4. To amend the Fund's fundamental policy relating to securities lending.
[ ] For [ ] Against [ ] Abstain
5. To amend the Fund's fundamental policy regarding industry concentration.
[ ] For [ ] Against [ ] Abstain
6. (For Class S shareholders only) To include Class S shares under the
Fund's Plan of Distribution Pursuant to Rule 12b-1.
[ ] For [ ] Against [ ] Abstain
I PLAN TO YES NO
ATTEND [ ] [ ]
THE MEETING
